1.  We have audited the attached Balance Sheet of K S OILS LIMITED
 (''the Company'') as at June 30, 2011 and also the Profit and Loss account
 and the Cash Flow statement for the period ended on that date annexed
 thereto. These financial statements are the responsibility of the
 Company''s management. Our responsibility is to express an opinion on
 these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India. Those Standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s Report) Order, 2003, as
 amended by the Companies (Auditor''s Report) (Amendment) Order, 2004,
 issued by the Central Government of India in terms of sub-section (4A)
 of Section 227 of ''The Companies Act, 1956'' of India (the Act'') and on
 the basis of such checks of the books and records of the company as we
 considered appropriate and according to the information and
 explanations given to us, we give in the Annexure a statement on the
 matters specified in paragraphs 4 and 5 of the said Order.
 
 4.  Further to our comments in the paragraph 3 above, we report that:
 
 i.  We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit;
 
 ii.  In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books;
 
 iii.  The balance sheet, Profit and loss account and cash fow statement
 dealt with by this report are in agreement with the books of account;
 
 iv In our opinion, the balance sheet, Profit and loss account and cash
 fow statement dealt with by this report comply with the accounting
 standards referred to in sub-section (3C) of section 211 of the
 Companies Act, 1956;
 
 v.  On the basis of the written representations received from the
 directors, as on June 30, 2011, and taken on record by the Board of
 Directors, we report that none of the directors is disqualified as on
 June 30, 2011 from being appointed as a director in terms of clause (g)
 of sub-section (1) of section 274 of the Companies Act, 1956.
 
 vi. Sundry Debtors are subject to confirmation and reconciliation. Its
 consequential effect, if any, on the relevant asset and loss for the
 period, are not quantifiable.
 
 vii.  Attention is invited to the following notes in Schedule 21:
 
 a) Variations/ fluctuations in costs and sales price and our reliance on
 the management representation, this being a technical matter (Note 6);
 
 b) Position of inventory as per report of independent chartered
 accountants. Report for position of debtors & inventory awaited from
 the stock auditors appointed by lead bankers.  The reasons for which we
 could not observe inventory count as provided under Assurance Standard
 SA 501 Audit Evidence- Additional Considerations For Specific Items.
 (Note 8); and
 
 c) Pending approval of the Central Government for the excess managerial
 remuneration of Rs. 96 lacs (Note 11(b)).
 
 viii. In our opinion and to the best of our information and according
 to the explanations given to us, the said accounts read together with
 accounting policies and notes in schedule 21, give the information
 required by the Companies Act, 1956, in the manner so required and
 subject to our comments in para vi above and read with our observations
 in para vii above, give a true and fair view in conformity with the
 accounting principles generally accepted in India;
 
 a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at June 30, 2011;
 
 b) in the case of the Profit and Loss account, of the loss for the
 period ended on that date; and
 
 c) in the case of Cash Flow Statement, of the cash flows for the period
 ended on that date.
 
 ANNEXURE TO AUDITORS'' REPORT
 
 [Referred to in paragraph 3 of the Auditors'' Report of even date to the
 members of K. S. OILS Limited on the financial statements for the period
 ended June 30, 2011]
 
 (i) (a) The Company has maintained proper records showing full
 particulars, including quantitative details and situation of fixed
 assets.
 
 (b) The Company has a regular programme of physical verification of its
 fixed assets, which in our opinion is reasonable having regard to the
 size of the Company and the nature of its assets. In accordance with
 this programme, fixed assets were physically verified by the management
 during the period. We are informed that no material discrepancies were
 observed on such verification.
 
 (c) In our opinion and according to the information and explanations
 given to us, substantial part of fixed assets has not been disposed off
 by the company during the period.
 
 (ii) (a) The inventory has been physically verified by the management of
 the Company along with an Independent Firm of Chartered Accountants
 appointed by the Company. In our opinion, the frequency of verification
 is reasonable.
 
 (b) The procedures of physical verification of inventory followed by the
 management are reasonable and adequate in relation to the size of the
 Company and the nature of its business.
 
 (c) The Company is maintaining proper records of inventory and no
 material discrepancies were noticed.
 
 (iii) (a) The Company has not granted any loans, secured or unsecured
 to companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956. Accordingly, the
 provisions stated in paragraph 4 (iii) (b),(c) and (d) of the order are
 not applicable.
 
 (b) The Company has not taken any loans, secured or unsecured from
 companies, firms or other parties covered in the register maintained
 under section 301 of the Companies Act, 1956. Accordingly, the
 provisions stated in paragraph 4 (iii)(f)and (g) of the order are not
 applicable.
 
 (iv) In our opinion and according to the information and explanations
 given to us, the existing internal control procedures are required to
 be strengthened to be commensurate with the size of the Company and the
 nature of its business for the purchase of inventory and fixed assets
 and for the sale of goods. During the course of our audit, we have not
 observed any continuing failure to correct major weakness in internal
 control system of the Company.
 
 (v) (a) According to the information and explanations given to us, we
 are of the opinion that the particulars of contracts or arrangements
 referred to in section 301 of the Companies Act, 1956 that need to be
 entered into the register maintained under section 301 have been so
 entered.
 
 (b) In our opinion and according to the information and explanations
 given to us, the transactions made in pursuance of such contracts or
 arrangements exceeding value of Rupees five lakhs have been entered into
 during the financial period at prices which are reasonable having regard
 to the prevailing market prices at the relevant time.
 
 (vi) In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits from the public
 to which the directives issued by Reserve Bank of India and the
 provisions of Sections 58A and 58AA or any other relevant provisions of
 the Companies Act, 1956 and the Companies (Acceptance of Deposits)
 Rules, 1975 with regard to the deposits accepted from the public apply.
 
 (vii) In our opinion and according to the information and explanations
 given to us, the Company needs to strengthen its existing internal
 audit system to make it commensurate with the size and nature of its
 business. The Internal audit reports for the period upto March 31, 2011
 have been made available to us.
 
 (viii) The Central Government has prescribed maintenance of cost
 records under section 209 (1) (d) of the Act in respect of Company''s
 products viz. ''Vanaspati, Refined Vegetable Oils and Power Generation''.
 We have broadly reviewed the books of account maintained by the Company
 pursuant to the rules made by the Central Government for the
 maintenance of cost records and are of the opinion that prima facie,
 the prescribed accounts and records have not been made and maintained.
 
 (ix) (a) According to the records and information made available, the
 Company is generally regular in depositing Undisputed statutory dues
 including Investor Education and Protection Fund, Wealth Tax, Custom
 Duty Provident Fund, Employees State Insurance, Service Tax, Sales Tax,
 Excise duty cess & other material statutory dues applicable to it with
 the appropriate authorities except Income Tax where delays ranging from
 few months to few years have been observed. As per the information and
 explanation and records made available to us, the undisputed statutory
 dues payable for a period of more than six months from the date they
 became payable as at June 30, 2011 are as follows
 
 Name of Statute      Nature of the dues            Amount (Rs. Lacs)
 
 Income Tax           Dividend Distribution Tax           133.26
 
 Income Tax           Income Tax                          470.96
 
 Further, since the Central Government has till date not prescribed the
 amount of cess payable under section 441A of the Companies Act,1956, we
 are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (b) According to the information and explanation given to us, there are
 no dues of income tax, including Investor Education and Protection
 Fund, Provident Fund, sales-tax, wealth tax, service tax, customs duty
 excise duty and cess which have not been deposited on account of any
 dispute except for the dues in relation to sales tax , excise duty &
 income tax as disclosed hereunder:
 
                   Nature of the     Amount
 Name of the       dues and period   (Rs. in     Period   Forum where
                                                          dispute is
                                                          pending
 Statute           to which it
                   relates            lacs)
 
 Sales Tax Act     Sales tax/CST      10.74      1998-99  High Court
 
 Sales Tax Act     Sales tax/CST       5.59      2003-04  Revenue Board
 
 Sales Tax Act     Sales tax/CST       3.24      2003-04  Revenue Board
 
                                                          Deputy 
                                                          Commissioner
                                                          Appeal,
 Sales Tax Act     Sales tax/CST       4.58      2007-08
                                                          Gwalior
 
 Madhya Pradesh                                           Deputy 
                                                          Commissioner
                                                          Appeal,
                       VAT            15.62      2007-08  Gwalior
 
                                                          Deputy 
                                                          Commissioner
                                                          Appeal,
 Entry Tax Act     Entry Tax          40.54      2006-07
                                                          Gwalior
 
                                                          Deputy
                                                          Commissioner
                                                          Appeal,
 
 Entry Tax Act     Entry Tax          12.11      2007-08  Deputy
                                                          Commissioner
                                                          Gwalior
 
 Central Excise 
 Act               Excise duty        24.11      2001-02  High Court
 
 Central Excise 
 Act               Excise duty         2.55      2002-03  High Court
 
 Income Tax Act    Income Tax          5.46      2004-05  Assistant
                                                          Commissioner
 
 Income Tax Act    Income Tax         14.53      2007-08  Commissioner
                                                          Appeals
 
 (x) The company does not have any accumulated losses at the period end.
 Further, the company has incurred cash losses during the financial
 period covered by our audit, however there were no cash losses in the
 immediately preceding financial year.
 
 (xi) On the basis of the records made available and the information and
 explanation given to us. The company has not defaulted in repayment of
 dues except the following loans from banks and financial institutions
 along with interest due thereon, which has remained unpaid till date.
 The Company has not issued any debentures:
 
 Default in payment of Principal Amount (Rs in Lacs)
 
 Sr.
 No    Name of the financial 
       institution/ Bank           Due date of
                                   payment         Default in Principal
 
 1     State Bank of India         30-6-2011               821
 
 2     RABO Bank                    8-6-2011               347
 
 3     ICICI Bank                  30-6-2011               450
 
 4     Central Bank of India       30-6-2011               475
 
 Default in payment of Interest (Rs. In lacs)
 
 Sr. 
 No  Name of the financial 
     institution/ Bank       Due date of payment   Default in interest
 
 1    State Bank of India            30-6-2011              129
   
 2    RABO Bank                       8-6-2011               36
 
 3    ICICI Bank                     30-6-2011               45
 
 4    Central Bank of India          30-6-2011              213
 
 5    State Bank of Mysore           30-5-2011              108
 
 6    State Bank of Mysore           30-6-2011              101
 
 7    Federal Bank                   30-6-2011               51
 
 8    Jammu &Kashmir Bank            30-6-2011               58
 
 9    Axis Bank                      30-6-2011               40
 
 10   Life Insurance Corp. of India  28-2-2011               47
 
 11   Life Insurance Corp. of India  31-3-2011              100
 
 12   Life Insurance Corp. of India  30-4-2011               98
 
 13   Life Insurance Corp. of India  31-5-2011              102
 
 14   Life Insurance Corp. of India  30-6-2011              100
 
 (xii) According to the records of the Company and according to the
 information and explanations provided to us, we are of the opinion that
 the company has not granted loans and advances on the basis of security
 by way of pledge of shares, debentures and other securities.
 
 (xiii) In our opinion, the Company is not a chit fund or a nidhi /
 mutual benefit fund / society.  Therefore, the provisions of clause
 4(xiii) of the Companies (Auditor''s Report) Order, 2003 (as amended)
 are not applicable to the Company.
 
 (xiv) In our opinion and according to the information and explanations
 given to us, the Company is not dealing/ trading in shares, securities,
 debentures and other investments. Therefore, the provisions of clause
 4(xiv) of the Companies (Auditor''s Report) Order, 2003 (as amended) are
 not applicable to the Company.
 
 (xv) In our opinion and according to the information and explanations
 given to us, the company has not given any guarantee for loans taken by
 others from banks or financial institutions during the period.
 
 (xvi) In our opinion, the term loans have been applied for the purpose
 for which the loans were raised.
 
 (xvii) According to the information and explanations given to us and on
 an overall examination of the balance sheet of the Company, we report
 that no funds raised on short-term basis have been used for long-term
 investment.
 
 (xviii) According to the information and explanations given to us,
 while converting equity warrants allotted in the previous year on a
 preferential basis, the Company has made allotment of equity shares to
 the parties listed in the register maintained under Section 301 of the
 Act. In our opinion, the price at which shares have been issued is not
 prejudicial to the interest of the Company.
 
 (xix) The Company did not issue any debentures during the period.
 
 (xx) During the period the company has not raised any money through
 public issue.
 
 (xxi) During the course of our examination of the books and records of
 the company, carried out in accordance with the generally accepted
 auditing practices in India, and according to the information and
 explanations given to us, we have neither come across any instance of
 fraud on or by the company, noticed or reported during the period, nor
 have we been informed of such case by the management.
 
                                              For Haribhakti & Co.
 
                                            Chartered Accountants
 
                                     Firm Registration No.103523W
 
                                                             Sd/-
 
                                                     Chetan Desai
 
 Place: Mumbai                                            Partner
 
 Date : November 29, 2011.                    Membership No.17000